London 2012 to Positively Influence the Hotel Industry in UK according to Research

October 31, 2011

It has been predicted that the hotel industry in the UK will fare far better in the five years after the London 2012 Olympics compared to the five years preceding it, according to IBISWorld, the UK’s largest publisher of industry research.

IBISWorld forecasts that industry revenue will grow at an average annualised rate of 2.6% in the five years through 2016-17, to reach £18.0 billion ($20.6bn). Demand for accommodation from international visitors will be boosted by a global economic recovery. The London Olympics will be a key driver of growth leading up to and including 2012, when London is set to host one of the world’s greatest sporting events. IBISWorld also expects UK and global population growth to boost demand for local hotels and motels.

Over the past five years the financial crisis and subsequent recession have marred the performance of hotels and motels operating throughout the United Kingdom. The recession had a detrimental effect on household wealth across the United Kingdom and the globe, with corporate profits falling substantially as a direct result of the crisis.

Consequently, business travel budgets were slashed, while highly-indebted households found it increasingly difficult to finance trips and holidays. This has reduced domestic and international travel within the United Kingdom, from both household and business markets. IBISWorld estimates that over the past five years, UK hotel industry revenue contract by 1.1% on an average annualised basis, with revenue reaching £15.8 billion ($18bn) in 2011-12. Revenue is expected to grow by 3.8% in 2011-12, compared with the previous year.

Going forward, the UK hotel industry will be bolstered by a recovering UK economy, further aided by global economic growth that will see revenue from international tourists flow into the industry. A more prosperous domestic economy will allow businesses to increase their travel budgets to pre-crisis levels, meaning that more funds will be allocated to accommodation expenses. With unemployment falling at the same time and asset prices rebounding, individuals will also increase their expenditure on trips and holidays.

According to IBISWorld analyst, Zlatan Kapetanovic, the most significant event for the industry will be the London Olympic Games in 2012. “This will promote an influx of tourists into the region,” says Kapetanovic.

“Large numbers of both domestic and international visitors will help revenue grow rapidly in the period leading up to and including 2012.”

Much of this growth will be concentrated in the London region, with new enterprises and establishments entering the market to become involved in increased revenue and profits on offer. Population growth within the United Kingdom and the world over will also have a positive influence on demand, as there will be a greater number of tourists using hotel and motel services. According to IBISWorld, hotel industry revenue in the UK is expected to grow at an average annualised rate of 2.6% over the five years through 2016-17 to total £18.0 billion ($20.6bn).